Level of Regulatory Compliance of Indian Life Insurers and Its Determinants

Abstract

Globalisation, liberalisation and deregulation of insurance markets have taken place in the context of market access and equality of competitive opportunity through prudential regulation dealing with the issues such as product, price and market conduct regulation. Till 1999, the Indian insurance industry was characterized by public sector players. The amendment of Insurance Act 1938 and the birth of Insurance Regulatory Development Authority (IRDA) in 1999, following the Malhotra Committee recommendations led to increased competition with the entry of several private players. The insurers have to comply with the mandatory regulations and the IRDA ensures regulatory compliance by calling for periodical information from the players, undertaking inspection, conducting enquiries and investigations including audit of the insurers. Since the introduction of IRDA and the establishment of its regulatory mechanism pertaining to the overall functioning of the insurance industry from the year 2000, twelve years have passed. There arises the need for the regulatory apparatus to move forward in order to oversee compliance of regulations. In this context, an empirical study on the level of regulatory compliance by the Indian life insurers is significant. An original Life Insurance Regulatory Compliance Ind ex (LIRCI) was constructed to measure the level of regulatory compliance of the Indian life insurers. Further, the study modeled the factors determining the level of regulatory compliance of Indian life insurers. Indian life insurers have not complied with all the IRDA regulations and the level of regulatory compliance is negatively and significantly determined by the size of the life insurer.